Most local IPOs fail to fire

WESTERN Australia remained a dominant player among Initial Public Offering hopefuls in the past year, though most of the local IPOs were of insignificant monetary value and performed less than glamorously.

A report by KPMG on IPOs found that 17 of the 56 IPOs in 2002-03, representing around 30 per cent of the total, were based in WA.

Yet the total amount raised just managed to nudge the $60 million mark, which is just 1.9 per cent of the national amount raised.

Pull the $1.2 billion Promina Group float out of the equation and the figure improves marginally to 4.7 per cent of the national total.

Resource sector explorers that were banking on healthy commodity prices made up the bulk of IPOs in WA.

However, the KPMG survey found that investors would have been left wanting with 13 of the 16 IPOs to list by May 30 trading below their issue price. Just one was trading at issue price and only two recorded a share price increase.

Siberia Mining Corporation was up a massive 128 per cent at the end of May compared to its issue price, while Westonia Mines Ltd was up 100 per cent.

This performance was enough to rank them as the second and fourth best performers relative to other Australian IPOs.

De Grey Mining Limited, backed by mining heavyweight Ron Manners, slumped 50 per cent over the past year since its $4.5 million float last July.

In what must have been a bad month on the market, Australian Growth Limited, which listed just four days after De Grey, fell 84 per cent.

July was a big month for IPOs with six new listings – none of which made it to positive share price territory at the end of May.

Meanwhile, Cervantes Seafood Limited, which recruited former State Liberal leader Barry McKinnon as chairman, fell 58 per cent as it grappled with tough competition from other crayfish processors.

Even those who fancied a company backed by stockbroker David Reed may have felt disappointed with the 15 per cent decline of Reed Resources Ltd which also listed last July.

Of the ten worst IPOs from around the nation listed by KPMG, seven were based in WA.

KPMG’s national head of mergers and acquisitions Antony Cohen said IPOs remained a very difficult option for the vast majority of Australian businesses seeking equity.

“The latest survey shows IPOs are rewarding for only a handful of businesses that are medium-sized or greater and can deliver an attractive yield for new investors,” Mr Cohen said.

He said the 10 biggest floats dominated the money raised, accounting for $2.9 billion or 94 per cent of the money raised through the year. Outside this group, Mr Cohen said, the average public company float raised only $5.8 million.

Add your comment

Your comment may be used as a letter in our print edition. To do so, we need a full name, your suburb (or company name) and an email address so we can use to verify your details. We won't publish email addresses in the print edition.

BNiQ Disclaimer

It is important to note that the Morningstar information displayed by Business News is not to be copied or distributed except as authorised; and that such information is not warranted to be accurate, complete or timely and that neither Morningstar nor Business News are responsible for any damages or losses arising from any use of this information.

The information is general information only and does not constitute financial advice It is not intended to be, and should not be construed in any way as, investment, legal or financial advice